INSUBCONTINENT EXCLUSIVE:
Martina LauchengcoContributor
Martina spent over 20 years as a marketing and product executive building and crafting strategies for
market-defining software like Microsoft Office and Netscape Navigator
As an operating partner at Costanoa Ventures, she sits on multiple boards and advises companies on all things go-to-market
She also teaches at the UC Berkeley graduate school of engineering.
Jim is a seasoned sales executive with over 25 years experience in
diverse technology industries
As an operating partner at Costanoa Ventures, Jim provides companies with sales and market entry strategy advice
There is a prevailing belief that the magic formula for early-stage tech startups hinges on how quickly they achieve $1 million in annual
Investors in SaaS companies, in particular, are very guilty of pushing this or its equally loaded corollary, “When will you sign your
first six-figure deal”But in the rush toward these numbers, too many startups lose sight of their primary intent: These metrics are
supposed to be an indicator of product/market fit
We’ve seen companies reach $1 million in ARR in less than a year, yet not have enough market momentum to get their next million easily
We’ve seen early-stage companies so concerned about getting those first sales, they don’t validate the market and if they’re building
We’ve also watched a focus on new logos make companies forget about keeping existing customers happy, introducing unexpectedly high churn
— something startups can’t afford.Those first customers and that first million are supposed to be the bedrock on which the rest of the
Founders must constantly ask what they’re learning about their market, product and go-to-market approach — in that order! — so the
business becomes a flywheel.Revenue is a lagging indicator of sales success, so must likewise be prioritized accordingly
That’s not to say revenue isn’t vitally important and that there isn’t a great deal of urgency to it, but focusing on it too much too
early can mask big problems that will hurt startups later when the stakes are higher.Here are a few lessons we’ve learned by watching our
early-stage companies go through this crucial phase
Every early-stage company needs to do them well.Customer and market discovery is job No
1We talk about product and knowing customers a lot, but that is insufficient
Startups must understand the market, as well
How do customers do this today Is there urgency around the problem What is the community saying An early investor in PagerDuty went onto
Reddit and Quora and just looked at who people were talking about
It made his decision easy.To be really successful, it is as important to understand market dynamics as it is to deliver a great product
This also helps zero in on all the aspects of your ideal customer profile; it needs to be more specific than you think! This also then helps
qualify customers for future sales.Elevate Security stood out in their super-crowded security space because they carved out a unique
position around people-powered security
They used their early sales process to carefully qualify who would help them best develop their products
Their first product got shout-outs on social media from users who loved it — a rare occurrence in security — and were indicators they
had found good initial customers and were creating something unique.Build a product that sells itselfYou’ll always find smart people
saying, “I love what you’re doing.” Some things are so broken even a mediocre improvement is worth a change
But this is why revenue can be a false indicator for scalable success: Founders find enough early adopters to get that first million, which
leads them to believe the product is enough
The company starts chasing more revenue, not investing in a product-based growth engine
If sales keeps hitting their numbers, everyone believes things are fine
And then it’s usually a really heavy lift, with 6-12 months of product, sales or team upgrades.What startup doesn’t want a growth curve
like this Zoom had triple-digit growth for the last four years in a crowded, mature video conferencing category
Janine Pelosi, Zoom’s head of marketing, said the reason they were so successful before and after she arrived was they have a great
It’s reliable, easy to use, and the founder, Eric Yuan, was selling it every day
Yuan knew the market really well coming out of Webex, and always touching customers meant he could adjust company strategy accordingly
Zoom embodied the real magic formula: know your market + build great product.Pay attention to customer engagement and delightCustomer
satisfaction is simple: It comes from the perception that people get value from their purchase; it’s much less about how much they paid
It’s also always cheaper to make an existing customer happy than it is to acquire a new one, so make sure even in the early days that
you’re investing in making current customers happy advocates.Aquabyte uses computer vision to identify sea lice in the $160 billion
When they showed customers FreckleID (think facial recognition for fish) to uniquely identify fish in a pen of 200,000, fish farmers loved
The price they were willing to pay was 3x what the CEO thought possible
They’re likewise investing heavily in making sure their initial customer is successful with the product and are delighting them in
unexpected ways (handwritten holiday cards)
They have more prospects in their pipeline than they have capacity, which means they don’t need to expand sales to grow revenue fast.Your
startup may have the coolest tech, be in the biggest market and have the smartest team
No matter what your board says, remember revenue is NOT the primary indicator; it is simply an indicator
To become a breakout success, you need to read the tea leaves of all aspects of your market and build a product and customer experience that
